Correlation Between Mivne Real and Arad

Can any of the company-specific risk be diversified away by investing in both Mivne Real and Arad at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mivne Real and Arad into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mivne Real Estate and Arad, you can compare the effects of market volatilities on Mivne Real and Arad and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mivne Real with a short position of Arad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mivne Real and Arad.

Diversification Opportunities for Mivne Real and Arad

0.8

Correlation Coefficient

Mivne Real  Arad

Very poor diversification

The 3 months correlation between Mivne and Arad is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mivne Real Estate and Arad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arad and Mivne Real is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mivne Real Estate are associated (or correlated) with Arad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arad has no effect on the direction of Mivne Real i.e., Mivne Real and Arad go up and down completely randomly.

Pair Corralation between Mivne Real and Arad

Assuming the 90 days trading horizon Mivne Real Estate is expected to generate 0.87 times more return on investment than Arad. However, Mivne Real Estate is 1.15 times less risky than Arad. It trades about 0.15 of its potential returns per unit of risk. Arad is currently generating about -0.16 per unit of risk. If you would invest  106,239  in Mivne Real Estate on September 15, 2024 and sell it today you would earn a total of  4,361  from holding Mivne Real Estate or generate 4.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Mivne Real Estate  vs.  Arad

Mivne Real Estate

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mivne Real Estate are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mivne Real sustained solid returns over the last few months and may actually be approaching a breakup point.

Arad

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arad are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Arad may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mivne Real and Arad

The main advantage of trading using opposite Mivne Real and Arad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mivne Real position performs unexpectedly, Arad can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Arad will offset losses from the drop in Arad's long position.

The idea behind Mivne Real Estate and Arad pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.